Leader of the Chinese Communist Party Xi Jinping once asked officials in charge of the economy if China’s economy needs to surpass that of the United States in order to demonstrate the superiority of their system. At present, China’s economy is in an irreversible decline, and the real estate crisis and population crisis are escalating, and Xi’s wishes may be dashed. Some American media quoted economists predicting that China will never establish a meaningful lead over the United States, and the prediction that it will surpass the United States is a joke today.
Economist: China’s economy won’t overtake US
The Wall Street Journal reported on September 2 that as China’s economic growth slowed sharply last year, many experts began to reconsider the possibility of China’s economy overtaking the United States, and even doubted whether it would happen.
The Journal said that the outlook for China’s economy has become bleaker this year, and economists have become more worried about China’s long-term prospects. They have even lowered their forecasts for China in 2022. An aging population compounded by declining population growth, coupled with high debt levels, could weigh on any economic rebound, and economists are more skeptical that China’s economy will overtake the United States.
Former U.S. Treasury Secretary Lawrence Summers said China’s aging population, the Chinese Communist Party’s growing interference in business, and other challenges have prompted him to sharply reduce his economic growth expectations.
He argues that predictions of China’s rise, similar to previous predictions that Japan or Russia will overtake the United States, seem absurd today.
Leland Miller, chief executive of research firm China Beige Book, said the size of the economy alone did not reflect the quality of growth. In terms of GDP per capita, living standards in the United States are five times higher than in China, and the gap is unlikely to close anytime soon.
Xi Jinping calls for China’s economy to overtake US
Summers said that if China’s economic growth slowed significantly, it would affect the CCP’s influence. Especially in the competition between China and the United States, the economy is very important to the leaders of the CCP.
After the U.S. economy grew faster than China’s in the fourth quarter of 2021, Xi told officials to ensure that China’s economic growth outpaced the U.S. in 2022, according to a Wall Street Journal report on April 26.
Xi told top economic and financial officials that it was important to ensure steady growth in China’s economy, which would demonstrate the superiority of China’s one-party system over Western liberal democracies and the political and economic decline of the United States, according to sources.
Zhongnanhai will be politically significant this year. The 20th National Congress will be held on October 16.
The Wall Street Journal quoted Alfred Wu, a political scientist at the National University of Singapore, “The desire to have a stronger GDP compared to the U.S. doesn’t help a healthy economy but certainly helps the Party maintain its rule.”
Xi Jinping ‘s dream may fail
The reality is that China’s economic problems are still piling up, and the slump in the real estate market shows no signs of abating. This spring, an index tracking consumer confidence plummeted to its lowest level in decades; urban youth unemployment hit a record high of 20 percent.
The Lowy Institute, an Australian think tank, said in a March report that China is expected to grow by only about 2% to 3% a year between 2021 and 2050. The think tank cited the unbalanced age structure of China’s population, weakening returns on infrastructure investments, and other challenges.
China will never establish a meaningful lead over the U.S. , and even by mid-century, prosperity and per capita productivity will remain far below the U.S., the Lowy Institute wrote in the report. China’s growth has also been insufficient to give the country any major competitive advantage.
The Lowy Institute also said that since the report was released, China’s economy has slowed further. In fact, it may never be possible to surpass the the United States.
China’s 55 listed real estate companies lost nearly $8.7 billion in the first half of this year
China’s real estate crisis has not eased, and more real estate companies have experienced larger losses this year.
According to Bloomberg’s calculations, the 136 Chinese real estate companies that report their earnings to Hong Kong and mainland exchanges earned a total of $2.5 billion in annual profits in the first half of this year. That figure marks an 87% decline from the $19.2 billion in profits those same companies earned in the first half of 2021. Fifty-five companies had a total loss of nearly $8.7 billion, the worst semi-annual report in the history of China’s real estate industry.
Among the losing real estate companies, R&F Properties suffered the worst loss of 6.92 billion yuan ($1 billion) in the first half of the year, which was a decrease of 10 billion yuan compared with the profit of 3.08 billion yuan in the same period last year; CCRE Real Estate lost 5.61 billion yuan, which is the highest since it opened for business. The third highest loss is Ronshine China, with 4.429 billion yuan in the first half of the year.
Country Garden, the largest real estate company by market value, made a profit of 612 million yuan ($89.2 million) in the first half of the year, down 96% from the same period last year. A few days ago, the company said that the Chinese real estate market has entered a cold winter.
Life is getting harder, young Chinese don’t think about having children
The sluggish economy and the impact of coronavirus restrictions are causing some young Chinese to delay plans to marry or have children, running counter to the CCP’s efforts to boost the population.
The Wall Street Journal quoted Peng Xiujian, a senior researcher at Victoria University in Australia, saying that when economic pressure is high and many people feel insecure, people’s reproductive decisions will definitely be affected.
China’s population will start to decline this year, according to joint research by Peng’s team at Victoria University’s Centre of Policy Studies and China’s official think tank, the Shanghai Academy of Social Sciences. The rate of population decline is expected to accelerate over the next few years, with China’s population expected to fall to 587 million by 2100, less than half the current figure of about 1.4 billion.
A 31-year-old accountant who lives in China’s Pearl River Delta region said several of his friends who work in the real estate industry have either lost their jobs or suffered significant pay cuts since last year.
Rita Zhang, a freelance illustrator, and her husband bought a home in April last year when house prices were rising, and they feared it would go even higher if they didn’t sell. But since then, China’s property-market control policies have caused house prices to plummet, and many of Zhang’s clients have made layoffs and slashed orders.
Zhang said that it is difficult to pay the mortgage, and she and her husband really do not have enough confidence in the future income to consider having children.
In the coastal city of Ningbo, births in the first half of this year were down nearly 11 percent from a year earlier, while births in the eastern Chinese city of Dezhou fell 9 percent over the same period.
Yi Fuxian, a scientist at the University of Wisconsin-Madison, said the dynamic clearing policy is tantamount to aggravating the trend of declining births. He believes that China’s population has been shrinking for several years.
He estimates that China’s pandemic prevention and control measures will reduce the number of births by about 1 million in 2021 and 2022. He said the lockdown had contributed to a sharp drop in the number of marriages in 2020 and 2021.
Yuwa Population Research, a group of six Chinese demographers and economists, also predicted earlier this year that China’s population will shrink to 685 million by 2100.